7.1-1 ; 7.2-1 ; 7.2-2 ; 7,2-3 ; 7,2-4 (Profit/Costs/Production) -K.Cappo Flashcards
The difference between the revenue a firm earns and the sum of the opportunity costs of all the resources employed at that firm defines __.
Economic Profit
As long as revenue is __ than the sum of opportunity costs, business owners can afford to pay all of the employees a salary that is better than their next best opportunity.
Greater
If total revenue is less than the sum of opportunity costs of resources….
Resources will seek employment elsewhere
The difference between a firm’s total revenue and the explicit expenses that it must pay out defines __.
Accounting Profit Calculated
Accounting costs are only __ costs that the firm has to write checks to pay.
Explicit
The opportunity costs of the Employees, Managers, and Shareholders (are/aren’t) accounted for in accounting costs.
Aren’t
What is the opportunity cost(s) of the managers, employees, and shareholders?
The most money that they could earn elsewhere.
Economic rent is…
The amount of payment an economic resource receives in excess of of its next best alternative.
Economic profit is a notion that determines…
Whether or not a firm is doing well enough to stick around.
What is the difference between economic reasoning and accounting reckonings is __.
Sunk Costs
A Sunk Cost is defined as…
An unrecoverable cost incurred in a previous time period that has no relevance for any current decisions.
If benefits are __ the required additional costs to finish a project, then finish it.
Greater than
If benefits are less than the required additional costs to finish a project, then __ the project.
Terminate
Do not let __ costs make you do unprofitable things.
Sunk
T or F: Monetary payment must be made before cost is incurred.
False
Businesses ask the question “How much should I produce?” to ensure that….
They will make the most profit
A firm’s given inputs allows it to make certain __.
Outputs
What three things do we need to know about a firm to determine its profit?
Technology, Costs, Prices
How much output a firm can produce with a given amount of input is mainly determined by __.
Technology
The amount of output a firm can produce with a given amount of input defines __.
Total Output
The Short Run is…
A brief period of time during which you can change only one (or a few) of your inputs.
While some inputs are fixed, others are __.
Variable
The total amount of output that a given amount of labor can produce, holding constant technology and holding constant the quantity of all other inputs that the firm used is…
Total output of variable input labor
The total output schedule shows….
The total amount of output you can produce with given amounts of variable input labor, holding constant technological know how and the amount of all other inputs used.
T or F: In the short run, all inputs are variable.
False
A productions possibility chart shows
Total output
T or F: Given the firm’s technology and the firm’s cost to produce output, economists are able to predict a firm’s profit.
False
Factor space, number of conveyor belts, tools, and raw materials are all __.
Fixed
Total Output is
The amount of output a firm can produce with a given amount of labor (holding constant technology and other inputs).
The total product schedule can be represented on a graph by a __.
Total Product Curve
The maximum point is also the __.
Capacity
After the maximum point, total number of the product produced begins to __.
Shrink
The total product curve is __ shaped.
“S”
The total product curve is convex when the output is __ at a(n) __ rate.
Increasing; Increasing
The total product curve is concave when the output is __ at a(n) __ rate.
Increasing; Decreasing
The change in total output that results from increasing the amount of variable input, labor, by 1 unit is
The concept of the marginal product of labor
When too much of the variable input is congested in the fixed inputs,
Productivity falls
After hitting the maximum point, the volume of output __ overall.
Decreases
When the total product curve is convex, the slope is __.
Increasing
When the total product curve is concave, the marginal product is __.
Diminishing
Marginal product of labor is defined as
The additional output a firm can produce by hiring one more worker.
A two story diagram shows
how two graphs are related.
In a two story diagram, the two graphs have the same variable measured on the which axis?
Horizontal or “x” axis
When the total product curve is convex, it causes marginal product to __.
Increase
When the total product curve maxes out, the marginal product becomes __.
Negative
As slope on the total product curve gets steeper, marginal product __.
Increases
When you add extra workers all working together at the same time, what becomes possible?
Specialization and teamwork
Marginal product of technology is
how production changes when you add additional workers that are working together at the same time.
T or F: If the marginal product is negative, the slope of the total product curve is negative.
True
T or F: When the marginal product is increasing, the total product curve is convex.
True
T or F: The marginal product curve usually starts small, increases to a maximum, and starts to decrease.
True
T or F: Marginal product is usually graphed with marginal product on the vertical axis and the variable output on the horizontal axis.
True
T or F: Using Marginal Product (MP), a firm can determine the level of output it has to produce in order to maximize profits.
True
Marginal Product (MP) tells us
The benefit of adding a worker
Average Product (AP) tells us
Output per worker
The total output divided by the total labor input equals the
Average product of labor
T or F: The slope of a line from the origin to any point on a graphed curve changes with every point.
True
When the marginal product of labor curve is above the average product, the average product curve is __.
Rising
If you’re adding workers that are more productive than the average, you’re pulling __ the average.
Up
The marginal product curve will intersect the average product curve when the average product curve is at its __ of average product.
Maximum
When the marginal product of labor curve is below the average product, the average product is __.
Falling
Average product and marginal product are equal
At the maximum average product
If you’re adding workers that are less productive than average, you’re pulling __ the average.
Down
When the curve is sloping __, the curve is convex, and when the curve is sloping __ the curve is concave.
Upward; Downward
